In Re Corn Derivatives Antitrust Litigation (Mdl 414). Appeal of John E. Koerner & Co., Inc., Imperial Products Corporation, and Pan-O-Gold, Inc , 748 F.2d 157 ( 1984 )

OPINION OF THE COURT

SEITZ, Circuit Judge.

I.

A group of attorneys representing certain members of the plaintiff class,¹ who are consumers of corn derivative products, move for the disqualification of Cochrane & Bresnahan as attorneys for the appellant Pan-O-Gold Baking Company. This motion was made during the pendency of this appeal challenging a order of the district court approving the settlement of the class action.

II. FACTS

The parties tacitly agree that this court should decide this motion on the present record. The pertinent facts are not in dispute. The St. Paul, Minnesota, law-firm of Cochrane & Bresnahan (“C & B”) was privately retained by the Pan-O-Gold Baking Company, Inc. (“Pan-O-Gold”) and Land O’Lakes, Inc. (“Land O’Lakes”) to file separate antitrust complaints against the major producers of corn derivative products. Several other actions were brought throughout the country, and all the actions were consolidated by the Multidistrict Litigation Panel into the present action in the district court in New Jersey. C & B continued to represent both Pan-O-Gold and Land O’Lakes, who were named plaintiffs, as well as a plaintiff class member, General Mills, in this litigation.

After consolidation, a partner of C & B, John Cochrane, was named by the district court to be a member of the plaintiffs’ steering committee, the group of attorneys that guided the litigation of this matter.

Before this action reached trial, a settlement was negotiated. Prior to the hearing by the district court on the fairness of the settlement, John Cochrane filed a written objection to the settlement on behalf of Pan-O-Gold and Land O’Lakes. Later, on July 30, 1983, Cochrane was informed by an attorney for Land O’Lakes and General Mills that those companies had decided to accept the settlement if it were approved by the district court.

On September 7, 1983, the district court approved the settlement. On October 4, 1983, John E. Koerner & Company, Imperial Products Corporation and Pan-O-Gold, filed a notice of appeal. C & B mailed to the district court a notice of withdrawal as counsel of record for Land O’Lakes on October 18, 1983.² On this appeal, C & B does not purport to represent anyone other than Pan-O-Gold.

The movants then filed this motion to disqualify C & B as attorneys for Pan-O-Gold before this court on the ground that C & B’s continued representation of Pan-O-Gold would violate the controlling standards of professional conduct.³

III. DISCUSSION

A. A DISQUALIFICATION MOTION BEFORE THE COURT OF APPEALS

This disqualification issue was not raised in the district court. We believe, however, that this motion is properly before us. One of the inherent powers of any federal court is the admission and discipline of attorneys practicing before it. See Matter of Abrams, 521 F.2d 1094, 1099 (3d Cir.), cert. den., 423 U.S. 1038, 96 S.Ct. 574, 46 L.Ed.2d 413 (1975) (each court may create independent standards and rules for the admission and discipline of attorneys before it); Ramos Colon v. United States Attorney, 576 F.2d 1, 3 (1st Cir.1978). See also Fed.R.App.P. 46(C) (granting courts of appeals broad powers to discipline attorneys).

To resolve this motion, we must determine the governing standard for professional conduct before this court. Our court of appeals has never formally adopted any particular formulation of the standards of professional conduct. The lack of formal standards, however, cannot mean that the attorneys appearing before us do not have ethical obligations and duties. See United States v. DeFalco, 644 F.2d 132 (3d Cir. 1979) (en banc) (duty of professional conduct required before the court of appeals). Also, while the exact contours of that duty have not been stated, the vast majority of the courts in this country have adopted, with slight variation, the Code of Professional Responsibility promulgated by the American Bar Association, and thus, the basic principles of an attorney’s duties and responsibilities are clear and easily applied. Further, since each of the attorneys in C & B are bound by the duties imposed by the bars of their respective states, they have notice of the common principles against conflicts of interests imbedded in the national standards of current practice.

We believe that the appropriate guidance for finding the current national standards of ethical norms lies in the standards promulgated by the American Bar Association. Cf. Strickland v. Washington, — U.S. —, 104 S.Ct. 2052, 2065, 80 L.Ed.2d 674 (1984) (looking to ABA standards in determining prevailing norms of practice for sixth amendment claim). Accordingly, we will apply the principles and rules set forth in the ABA Model Code of Professional Responsibility, and in the recently approved Model Rules of Professional Conduct.

B. STANDING

The movants, purporting to speak for the plaintiff class, claim that C & B breached its duty of professional responsibility by taking a position on appeal for Pan-O-Gold adverse to that of Land O’Lakes in litigation in which C & B had previously represented both parties.

G & B contends that the plaintiff class, as an entity, lacks standing to challenge the alleged breach of duty to Land O’Lakes. They argue that the correlative right to C & B’s duty belongs only to the former client, Land O’Lakes. See In re Yarn Processing Patent Validity Litigation, 530 F.2d 83, 88-89 (5th Cir.1976) (requiring disqualification motion to come from former client). But see Kevlik v. Goldstein, 724 F.2d 844 (1st Cir.1984) (disqualification motion may be made by any opposing attorney under his duty to report disciplinary violations). Assuming without deciding that a motion to disqualify must be brought by a former client, we believe that the requirement is satisfied because the present record discloses that Land O’Lakes, through their current attorneys, joined this motion to disqualify C & B. We, therefore, consider this motion as brought by Land O’Lakes.

Further, because there is a conflict between the positions of two clients who had individually and privately retained C & B, we may consider this case solely in the context of a conflict of interest between the attorney and those clients. We consider this to be a case where two clients retained the same law firm to file suit, and where, later, that law firm chose to represent one of those clients against the other in the course of the same litigation. In view of our evaluation of the situation, we emphasize that it is unnecessary to address the considerable ethical problems that might arise between an attorney named by the court to represent the class and members of the class, or the general problems that might arise when some members of a class favor a settlement and others do not. Cf. Developments, Conflicts of Interest in the Legal Profession, 94 Harv.L.Rev. 1247, 1447-57 (1981) (discussing theories of representation by class action attorneys).

C. THE DUTIES OWED BY C & B

C & B was retained by Land O’Lakes in this litigation and owed their client a duty of loyalty. In addition, the attorneys of C & B, as members of the bar, owe a general duty to maintain public confidence in the integrity of the bar. In re Eastern Sugar Antitrust Litigation, 697 F.2d 524, 530 (3d Cir.1982). Under the ABA Code, these standards are reflected in Canons 5 and 9.

C & B owed Land O’Lakes a duty of vigorous advocacy. C & B contends, however, that while it may have owed Land O’Lakes that duty, it no longer owes them a duty of loyalty because C & B withdrew as counsel for Land O’Lakes. The duty of loyalty does not always detach when the representation ends. A client has an expectation that the attorney will diligently pursue his goals until the matter is completely resolved, absent an effective waiver. In litigation, an attorney may not abandon his client and take a adverse position in the same case. This is not merely a matter of revealing or using the client’s confidences and secrets, but of a duty of continuing loyalty to the client.

Under the ABA Code, there was no express prohibition against representation of interests adverse to former clients, although this court has used Canon 9, “the appearance of impropriety,” to imply such a duty. See e.g., Richardson v. Hamilton International Corp., 469 F.2d 1382, 1385-86 (3d Cir.1972), cert. den., 411 U.S. 986, 93 S.Ct. 2271, 36 L.Ed.2d 964 (1973). Under the ABA Model Rules, this duty is clearly stated in Rule 1.9:

A lawyer who has formerly represented a client in a matter shall not thereafter: (a) represent another person in the same or substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation.

ABA Model Rules of Professional Conduct, Rule 1.9. A rule against representation of interests adverse to a former client in the same or substantially related litigation has several purposes. It is a prophylactic rule to prevent even the potential that a former client’s confidences and secrets may be used against him. Without such a rule, clients may be reluctant to confide completely in their attorneys. Second, the rule is important for the maintenance of public confidence in the integrity of the bar. See Richardson, supra. Finally, and importantly, a client has a right to expect the loyalty of his attorney in the matter for which he is retained.

We recognize that in some cases there may be relevant countervailing considerations. This court has often employed a balancing test in determining the appropriateness of the disqualification of an attorney. See e.g. United States v. Miller, 624 F.2d 1198, 1201 (3d Cir.1980). In determining the relevant considerations, we once again note that in this appeal C & B does not purport to represent the class. Therefore, a disqualification of C & B for this appeal would not require evaluation of the prejudice to the class. With respect to Pan-O-Gold and Land O’Lakes, C & B represented both of these clients for several years in this complex antitrust litigation. Balanced against Land O’Lakes’ interests in the loyalty of its attorney are the interests of Pan-O-Gold in retaining its chosen counsel who has extensive familiarity with the factual and legal issues involved, and in avoiding the time and expense required to adequately familiarize a new attorney with the matter.

While disqualification would serve to increase the costs of litigation for Pan-O-Gold, it would be unfair, appearances apart, to permit C & B to use against its former client the information about the strengths and weaknesses of the case gained from the joint representation. Under these circumstances, C & B must be disqualified.

D. CONSENT BY THE FORMER CLIENT

C & B contends that it is still proper for it to represent Pan-O-Gold because Land O’Lakes consented to the continued representation by C & B. However, the burden of showing consent is on C & B, IBM v. Levin, 579 F.2d 271, 282 (3d Cir. 1978), and there is no indication in any of the papers or affidavits submitted that Land O’Lakes consented to C & B’s continued representation of Pan-O-Gold during this appeal.⁴ Further we note that this disqualification motion was brought, inter alia, by Land O’Lakes’ attorney and we must infer that Land O’Lakes wishes C & B to be disqualified. Because we do not find consent, we do not reach the issue of whether there may be some circumstances where even the consent by the former client will not immunize an attorney against a disqualification based upon the appearance of impropriety and the maintenance of the integrity of the bar. See ABA/BNA Lawyers’ Manual on Professional Conduct 51:207 (1984).

IV.

The motion to disqualify Cochrane & Bresnahan as counsel to Pan-O-Gold before this court will be granted.

1 . The attorneys purport to speak for the plaintiff class. In view of our resolution of the standing issue, it is unnecessary to decide whether these attorneys in fact speak for the whole class.

2 . C & B states that it also withdrew as counsel to General Mills.

3 . The status of Mr. Cochrane as a member of the steering committee is not questioned before this court.

4 . Cochrane stated at oral argument that Land O'Lakes gave its consent to C & B's continued representation of Pan-O-Gold. However, he made no representations to that effect in his affidavit or reply to the motion. Neither can we find any indication of consent in the district court record. Under these circumstances, we do not believe a question of fact has been raised.